Long-term underperforming default funds should lose their default status, according to the Australian Institute of Superannuation Trustees (AIST).
AIST chief executive Eva Scheerlinck has told the Productivity Commission review of alternative default models that long-term underperforming funds should be replaced by better performing funds.
However, in doing so, she said there needed to be better rules in place for consumers to compare super fund net performance across both the default and choice sectors and noted that the AIST had backed the publication of a net benefit league table of super fund offerings by Australian Prudential Regulation Authority (APRA) across both sectors.
“Default members might want to leave a default option at some stage, and both members and employers might reasonably want to understand and compare their selection/default against the wider superannuation market,” Scheerlinck said.
However, she said the benefits of industry-specific default funds needed to be recognised.
“One of the very positive aspects of the current default system is that many employees are connected with default superannuation arrangements that are most appropriate to them,” Scheerlinck said. “Such a system recognises that different industries have different demographics that may require a different investment management style, different services, such as intra-fund advice, and different insurance offerings.”
The AIST also told the PC hearing that it remained supportive of the industrial relations judiciary being a part of the default funds selection process.
“AIST strongly supports the commission’s view that a quality filter is needed to short-list default funds and that the filter should be higher than the MySuper requirements,” Scheerlinck said. “But we also note that these measures already exist in the current Fair Work Commission default fund selection process which must be given fair consideration in the review process.”
